5 ms·

I'm finishing construction next month an 1,100 sq/ft single family home in the north bay area; a very high cost-of-living region. We started construction in Sep

by mikeg8 5y ago

I'm finishing construction next month an 1,100 sq/ft single family home in the north bay area; a very high cost-of-living region. We started construction in Sept 2021, after an intentional delay of a couple months to let lumber prices drop after peaking in May-June. My home will be built for about $350k (less land acquisition). I'm acting as contractor and have connections in the industry so very few can build at my cost. BUT, When I see numbers in articles like this ($837k ea), after dealing with pandemic construction pricing myself, it's painfully obvious there is a terrible lack of cost-control. This is not a sustainable solution. And scapegoating on the pandemic is not helpful. I'm convinced most government agencies cannot manage this type construction in an affordable way, including my home county of Sonoma where we are spending $250k - $350k per homeless person to house them in refurbished hotel rooms (remodeling, not new construction). I don't know what the solution is, but I have become convinced that local governments cannot build their way out of this. We have to come up with something better.

sjg007 5y ago
So you are saving ~30% right? Plus the land at probably <250k means $600k max net cost. I imagine the area you live in has $800k-$1m houses.
- mikeg8 5y ago
  About right, might be saving closer to 35%. Land cost was $500k in 2018, but its 3 acres, had existing utilities, and I can re-build another existing structure on the property what was red-tagged and will be 2 bed 2 bath, ~1800sq/ft primary dwelling. The one currently under construction is technically the accessory dwelling unit, but it really is a stand-alone house. With just the new ADU, we will be in ~$850k but appraised value is expected to be $1-1.3m. When we spend another $350-$400k re-building the primary dwelling, it will probably be worth $1.6-$2m with ability to rent one unit. The metric I care most about is my sq/ft build cost which will be around $300/ft. This is incredibly low for a custom home which ranges in the $400-650 ft range for a decent quality custom and $1000+ ft for higher-end residences. The sqft size of units in LA is not mentioned, but based on the video, they are between 400-600 ft. $837k / 600 sqft = $1395 ft. Wayyyyyyy too high for "affordable" housing.
dealforager 5y ago
The solution is real free markets. Constant government intervention in the housing market, the stock market, education, healthcare, and everything else under the sun has led us to where we are today. It always feels nice for a bit when the government bails you out, but the long term consequences are always much more severe. Prices are information and when all the information is polluted, it becomes very difficult to have a functioning economy. It's the same thing that happens in social media, trolls and bots pollute the information so it's impossible for most people to tell the truth apart from fiction. Unfortunately the regulatory capture is so deep and the problems have gotten so bad that I don't know how this can be solved without an extreme event.
- wolverine876 5y ago
  Why would free markets help homeless people? Is there any basis for this, other than claiming that one's favorite solution is the best? Free markets serve those who pay the most, which is good for allocating iPhones, but not for healthcare, basic housing, basic food, education, safety, etc., which should not depend on ability to pay. > It's the same thing that happens in social media, trolls and bots pollute the information so it's impossible for most people to tell the truth apart from fiction. Isn't that 'real free market', unregulated?
  - tgflynn 5y ago
    > Free markets serve those who pay the most As someone who has spent years in a low income situation due to health issues that hasn't been my experience. At least up until the pandemic food as well as many manufactured products, which are relatively unregulated, were quite affordable even for the lowest incomes. There's a large enough market of low income people so that companies like Walmart, dollar stores and even Amazon can make money serving that market. Housing and medical care, on the other hand, are completely unaffordable for a significant fraction of the population without government assistance.
    - wolverine876 5y ago
      I am not doubting your experience, but I don't think we can project that to the larger situation. > At least up until the pandemic food as well as many manufactured products, which are relatively unregulated, were quite affordable even for the lowest incomes. The data shows otherwise, that many people haven't been able to afford food (think of school lunch programs) and especially quality food. Also, large 'food deserts' exists in poor communities where food is unavailable beyond very expensive small stores. > There's a large enough market of low income people so that companies like Walmart, dollar stores and even Amazon can make money serving that market. I've thought that, but it turns out that they don't often don't serve low-income people. I've also spent plenty of time in low income areas, and retail options are very slim. I've been in the best grocery store in the neighborhood, where fruit scales were rusty, and it stunk of something rotting. It was packed.
legitster 5y ago
The problem is the government bidding system is completely borked. Especially in a state like California. The government would do better if it only acted as a buyer. "We will pay for any new units that are constructed that meet these qualifications" and let the thousands of independent developers and contractors do what they do.
_jal 5y ago
Now build that in downtown LA explicitly for housing homeless folks, and let us know how your permitting process goes.
- mikeg8 5y ago
  You would think that the city of LA would be able to do something to alleviate the permit process that the city of LA created to reduce the building costs being funded/managed by city of LA.
  - asdff 5y ago
    Maybe if the permitting process wasn't just a device for grifting in LA county.
hardtke 5y ago
Are your subcontractors fully insured? Do they fully pay workers compensation? Are their employees legally authorized to work in the US? There is a quite substantial price premium in the market now for contractors that follow the law, and government projects are forced to follow the law.
- mikeg8 5y ago
  I work full-time as a subcontractor on commercial projects in the SF bay area and am fairly familiar with the costs associated with insurance, workers comp etc. We utilize union labor to install our projects. And you are right, it does cost a lot to follow the laws. But those costs are not nearly high enough to explain how 400-600 sq/ft units are being built for between $1,100-$1,400 a square foot. My guess is much of the cost bloat is "administrative" and has nothing to do with real construction costs.
com2kid 5y ago
> My home will be built for about $350k (less land acquisition). How in the world? I got multiple bids in Seattle to add a 200sqft dormer, 125k was the lowest bid I got. A single bathroom around here costs a minimum of 15K to build, just to get people out to install the basics.
- mikeg8 5y ago
  I would like to publish a series of posts on my build process, including cost breakdowns, because I know there is interest after seeing some similar posts (https://news.ycombinator.com/item?id=30193899 https://news.ycombinator.com/item?id=30193899) Without knowing much about your project, a dormer add can get expensive because you are modifying the structural envelope of the home. although the new sq footage may be small, the building process is involved and risk is high because your modifying roof-lines, bearing walls etc. A dormer addition is not simple.

by mikeg8 5y ago

sjg007 5y ago

So you are saving ~30% right? Plus the land at probably <250k means $600k max net cost. I imagine the area you live in has $800k-$1m houses.

mikeg8 5y ago
About right, might be saving closer to 35%. Land cost was $500k in 2018, but its 3 acres, had existing utilities, and I can re-build another existing structure on the property what was red-tagged and will be 2 bed 2 bath, ~1800sq/ft primary dwelling. The one currently under construction is technically the accessory dwelling unit, but it really is a stand-alone house. With just the new ADU, we will be in ~$850k but appraised value is expected to be $1-1.3m. When we spend another $350-$400k re-building the primary dwelling, it will probably be worth $1.6-$2m with ability to rent one unit. The metric I care most about is my sq/ft build cost which will be around $300/ft. This is incredibly low for a custom home which ranges in the $400-650 ft range for a decent quality custom and $1000+ ft for higher-end residences. The sqft size of units in LA is not mentioned, but based on the video, they are between 400-600 ft. $837k / 600 sqft = $1395 ft. Wayyyyyyy too high for "affordable" housing.

dealforager 5y ago

The solution is real free markets. Constant government intervention in the housing market, the stock market, education, healthcare, and everything else under the sun has led us to where we are today. It always feels nice for a bit when the government bails you out, but the long term consequences are always much more severe. Prices are information and when all the information is polluted, it becomes very difficult to have a functioning economy. It's the same thing that happens in social media, trolls and bots pollute the information so it's impossible for most people to tell the truth apart from fiction. Unfortunately the regulatory capture is so deep and the problems have gotten so bad that I don't know how this can be solved without an extreme event.

wolverine876 5y ago
Why would free markets help homeless people? Is there any basis for this, other than claiming that one's favorite solution is the best? Free markets serve those who pay the most, which is good for allocating iPhones, but not for healthcare, basic housing, basic food, education, safety, etc., which should not depend on ability to pay. > It's the same thing that happens in social media, trolls and bots pollute the information so it's impossible for most people to tell the truth apart from fiction. Isn't that 'real free market', unregulated?
- tgflynn 5y ago
  > Free markets serve those who pay the most As someone who has spent years in a low income situation due to health issues that hasn't been my experience. At least up until the pandemic food as well as many manufactured products, which are relatively unregulated, were quite affordable even for the lowest incomes. There's a large enough market of low income people so that companies like Walmart, dollar stores and even Amazon can make money serving that market. Housing and medical care, on the other hand, are completely unaffordable for a significant fraction of the population without government assistance.
  - wolverine876 5y ago
    I am not doubting your experience, but I don't think we can project that to the larger situation. > At least up until the pandemic food as well as many manufactured products, which are relatively unregulated, were quite affordable even for the lowest incomes. The data shows otherwise, that many people haven't been able to afford food (think of school lunch programs) and especially quality food. Also, large 'food deserts' exists in poor communities where food is unavailable beyond very expensive small stores. > There's a large enough market of low income people so that companies like Walmart, dollar stores and even Amazon can make money serving that market. I've thought that, but it turns out that they don't often don't serve low-income people. I've also spent plenty of time in low income areas, and retail options are very slim. I've been in the best grocery store in the neighborhood, where fruit scales were rusty, and it stunk of something rotting. It was packed.

legitster 5y ago

The problem is the government bidding system is completely borked. Especially in a state like California. The government would do better if it only acted as a buyer. "We will pay for any new units that are constructed that meet these qualifications" and let the thousands of independent developers and contractors do what they do.

_jal 5y ago

Now build that in downtown LA explicitly for housing homeless folks, and let us know how your permitting process goes.

mikeg8 5y ago
You would think that the city of LA would be able to do something to alleviate the permit process that the city of LA created to reduce the building costs being funded/managed by city of LA.
- asdff 5y ago
  Maybe if the permitting process wasn't just a device for grifting in LA county.

hardtke 5y ago

Are your subcontractors fully insured? Do they fully pay workers compensation? Are their employees legally authorized to work in the US? There is a quite substantial price premium in the market now for contractors that follow the law, and government projects are forced to follow the law.

mikeg8 5y ago
I work full-time as a subcontractor on commercial projects in the SF bay area and am fairly familiar with the costs associated with insurance, workers comp etc. We utilize union labor to install our projects. And you are right, it does cost a lot to follow the laws. But those costs are not nearly high enough to explain how 400-600 sq/ft units are being built for between $1,100-$1,400 a square foot. My guess is much of the cost bloat is "administrative" and has nothing to do with real construction costs.

com2kid 5y ago

> My home will be built for about $350k (less land acquisition). How in the world? I got multiple bids in Seattle to add a 200sqft dormer, 125k was the lowest bid I got. A single bathroom around here costs a minimum of 15K to build, just to get people out to install the basics.

mikeg8 5y ago
I would like to publish a series of posts on my build process, including cost breakdowns, because I know there is interest after seeing some similar posts (https://news.ycombinator.com/item?id=30193899 https://news.ycombinator.com/item?id=30193899) Without knowing much about your project, a dormer add can get expensive because you are modifying the structural envelope of the home. although the new sq footage may be small, the building process is involved and risk is high because your modifying roof-lines, bearing walls etc. A dormer addition is not simple.